Rethinking Sino-Japanese competition: the diffusion of economic statecraft

Yan, Karl; Su, Jing Article — Published Version Rethinking Sino-Japanese competition: the diffusion of economic statecraft Asia Europe Journal Provided in Cooperation with: Springer Nature Suggested Citation: Yan, Karl; Su, Jing (2025) : Rethinking Sino-Japanese competition: the diffusion of economic statecraft, Asia Europe Journal, ISSN 1612-1031, Springer, Berlin, Heidelberg, Vol. 23, Iss. 2-3, pp. 415-433, https://doi.org/10.1007/s10308-025-00724-5 This Version is available at: https://hdl.handle.net/10419/330434 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Vol.:(0123456789) Asia Europe Journal (2025) 23:415–433 https://doi.org/10.1007/s10308-025-00724-5 ORIGINAL PAPER Rethinking Sino-Japanese competition: thediffusion ofeconomic statecraft KarlYan1· JingSu1,2 Received: 27 September 2024 / Revised: 8 January 2025 / Accepted: 11 March 2025 / Published online: 28 March 2025 © The Author(s) 2025 Abstract The Belt and Road Initiative (BRI) has been one of the primary vehicles through which China exports its infrastructure and developmental standards. China’s expanding ambitions to become an international standard-setter compelled a Japanese response. Shinzo Abe’s government has initiated strategies such as the Partnership for Quality Infrastructure. This paper juxtaposes the Chinese and Japanese approaches to securing their position in the global governance of infrastructure finance, with a particular focus on the high-speed railway industry. It posits that economic statecraft has diffused from Japan to China and then back to Japan. In emulating Chinese economic statecraft, Japan has increased state involvement in infrastructure project exports and centralized authority within the Prime Minister’s Office. The permeation of such statecraft and the apparent escalation of Sino-Japanese competition bear significant consequences for regional trade and developmental cooperation regimes. This heightened competition may initially afford South and Southeast Asian nations a broader choice of service and infrastructure providers. In the long run, if the competition solidifies, secondary states might find themselves compelled to integrate into either China’s hub-and-spoke model or Japan’s reinvigorated production networks. Moreover, such integration could render secondary states dependent on the technology and finance supplied by regional great powers. However, the eventual structure of the region will likely depend on how these two major powers navigate their rivalry. As South and Southeast Asian states and corporations become entwined in both states’ geopolitical and geoeconomic networks, we cannot rule out the evolution of a latticework of intersecting relationships. Keywords The belt and road initiative· Partnership for quality infrastructure· SinoJapanese relations· The Chinese National Development and Reform Commission· Japanese Prime Minister’s Office Extended author information available on the last page of the article 416 K.Yan, J.Su Introduction The leitmotif of development finance and infrastructure export in the Asia–Pacific could be that of Sino-Japanese competition. As a latecomer, China successfully caught up and aggressively exported its infrastructure projects, especially after launching the Belt and Road Initiative (BRI). Announced in 2013, its goal was to enhance connectivity among signatories, specifically in policy coordination, infrastructure connectivity, unimpeded trade, financial integration, and people-topeople connections. Infrastructure connectivity sits at the core of the BRI and has caught the attention of regional great powers. As a traditionally dominant supplier of infrastructure development, the rise of China “compelled a Japanese response,” such as the emphasis on high-quality infrastructure (Liff and Lipscy 2022). Additionally, to improve its geoeconomic and geopolitical positions in the Asia–Pacific, Japan’s economic statecraft marked a return to development finance, a long-term Japanese practice since the end of the Second World War. Such statecraft, however, involved political centralization, which entailed strengthening the Prime Minister’s (PM) administrative authority and improving inter-agency coordination—a marked feature of the second Abe administration. Against this backdrop, this paper asks two research questions. First, why did Japanese economic statecraft involve a centralization of political power? Second, how was such centralization implemented during the Abe administration? We argue that a reciprocal diffusion of economic statecraft occurred between China and Japan. Statecraft, according to Thurbon and Weiss (2021), involves a reconfiguration of domestic institutions to outcompete geopolitical and geoeconomic challenges. In the case of development finance and infrastructure export, these policy ideas were first transmitted from Japan to China, then back to Japan. However, the latter’s re-adoption of what Chen (2021) called “mercantilist development ideals” went beyond “supporting national firms with state-backed credits” as Abe introduced profound institutional changes to better coordinate infrastructure exports. These empirical phenomena suggest that (1) a rising China can have major implications on the development policies of advanced countries and (2) practices of statecraft, though prompted by geoeconomic and geopolitical pressures, are ultimately conditioned by domestic developmental practices. The paper does not deny the salience of power centralization in the hands of the Japanese PM that predates Abe’s tenure. However, we want to argue that external pressure from China provided a crucial catalyst, especially regarding infrastructure export policies. Against this backdrop, the contribution of this study is twofold. First, theoretically, the transnational circulation of infrastructure development practices challenges the conventional understanding that norms and practices usually flow from advanced countries to developing ones. Developmental ideas did not simply flow from Japan to China as China’s unique practices also influenced Japan’s management of its geoeconomic strategies. Moreover, particular practices of statecraft are conditioned by a state’s developmental 417 Rethinking Sino-Japanese competition: thediffusion of… outlook. Second, empirically, this paper details the institutional changes brought by Shinzo Abe’s centralization of administrative and decision-making powers. The return to statecraft bears significance to the engagement of cross-border businesses in the future and financial flows. The Asia–Pacific region will potentially witness greater intervention from policymakers, who opt to create the enabling conditions for multinational corporations to penetrate overseas markets. And this could lead to indistinct boundaries between businesses’ and states’ overseas economic activities. This qualitative study process traces reciprocal diffusion between Japan and China and evaluates the centralization of power under Shinzo Abe. We highlight that this study is a snapshot of a particular period. The centralization of power in the current PM’s Office (PMO, the Kantei), on the one hand, started during the Hashimoto period and, on the other hand, has weakened under the leadership of Fumio Kishida. Data was collected from official documents and news coverage published in Chinese, English, and Japanese. These documents were also supplemented by semistructured interviews conducted in China and Japan. Interviewees were recruited through the snowball method and selected based on their professional and academic knowledge of the inner workings of the Chinese and Japanese national governments and Sino-Japanese relations. For example, we have interviewed officials from the Chinese National Development and Reform Commission (NDRC), China’s Center for International Knowledge on Development, China State Railway Group (CR), Japan International Cooperation Agency (JICA), Japan External Trade Organization (JETRO), Central Japan Railway Company, former Japanese government officials, think tank researchers in Japan and China, and scholars working on Sino-Japanese relations in China and Japan. Interviews are coded throughout the text. For example, 191119Y indicates an interview conducted with Ms./Mr. Y on November 19, 2019. This paper is divided into six sections, including the introduction and conclusion. The second section outlines the main argument and positions the contribution of this study against existing literature on economic statecraft and policy diffusion. The third section provides an overview of policy learning on the Chinese side. The fourth section examines Japan’s responses to a rising China, and the fifth section outlines the specific ensuing institutional changes. Literature review China’s economic statecraft has focused on strengthening its geostrategic positioning through the provision of overseas infrastructure developmental assistance, and such globalization was done through “emulat[ing] the way Japan practiced development finance through being a recipient of Japanese ODA” (Chen 2021). The definition of statecraft initially focused on understanding practices through which noneconomic goals were achieved through economic means, such as sanctions and trade (Hirschman 1980; Baldwin 1985; Drezner 1999). Newer conceptualizations, however, looked inward as scholars began to examine the relationship between domestic economic practices and geopolitical and geoeconomic pressures. Such statecraft follows three logics: geoeconomics, focusing on strengthening commercial 418 K.Yan, J.Su competitiveness; geopolitics, focusing on military might; and geopolitics and geoeconomics, focusing on both commercial and military superiority (Thurbon and Weiss 2021). The exercise of statecraft, according to Thurbon and Weiss (2021), for example, involves the deployment of domestic policy tools and industrial policies. In the context of China, Chinese statecraft aims to facilitate the “going global” of Chinese capital, create international markets, and explore opportunities for economic cooperation and China’s overcapacity issues. More importantly, establishing first-mover advantages in foreign markets allows China to export and internationalize its technical standards and standards for global (private) governance (Yoshimatsu 2018; Yan 2022). Weiss and Thurbon (2021) see the Chinese case as one that uniquely achieves military-economic fusion capable “to lead in both military and economic arenas” and predominantly driven by state-owned enterprises (SOEs). Against this backdrop, integrating SOEs’ overseas business activities and the state’s strategic agenda is of utmost importance for top Chinese leaders. Scholars have found that the NDRC is crucial to such endeavor (Yan 2021, 2022; Paltiel and Yan 2025). The commission plays the role of a gatekeeper, especially concerning international infrastructure projects, despite the creation of the China International Development Cooperation Agency and related reforms to the commission in the late 2010s that can be interpreted to have weakened the commission’s ability to coordinate domestic and international situations. Indeed, with the Leading Group for Promoting the BRI and its Executive Office both located inside the NDRC compound, the commission’s directors have since served as the deputy director of the leading group and the office manager of its executive office. These institutional arrangements signify the salience and continuous involvement of the commission in the BRI-related policy process. In fact, the commission sees international infrastructure projects as akin to “domestic transaction in which a Chinese company is contracted to deliver a Chinese project paid in Chinese funds” (Paltiel and Yan 2025). A careful Japanese observer may argue that such statecraft has been Japan’s marked feature since the Second World War. This statement is not wrong, considering that Japan has long been using infrastructure development assistance for strategic purposes. However, contemporary statecraft in Japan involved streamlining decision-making and implementation processes at the national level. Power centralization was therefore adopted to achieve a similar goal as Chinese statecraft—executive coordination to ensure compliance and successful implementation of overseas projects. These practices belong to Japan’s broader initiative—what Katada (2020) called a “new state-led regional geoeconomic strategy” to “reinvent its usefulness in the regional setting.” Moreover, according to Katada and Liao (2020), China’s aggressive export of infrastructure projects has “pulled [ed] Japan back to its roots” by re-adopting development finance. Among various means of policy diffusion, such as coercion, learning, and emulation, it seems that diffusion between China and Japan occurred through competition, as Japan needed to manage a rising China. In implementing these policies, many scholars identified a process of two-way influence or mutual learning in infrastructure export strategies (Kratz and Pavlicevic 2019; Jiang 2019; Yoshimatsu 2023; Mao etal. 2024). For example, Japan’s policy frameworks around the Partnership for Quality Infrastructure (PQI) and Expanded Partnership for 419 Rethinking Sino-Japanese competition: thediffusion of… Quality Infrastructure (EPQI) were strategic responses to the BRI. Japan’s official development assistance (ODA) became a key tool for their implementation, and the scope of the two initiatives was broadened beyond Asia to include the rest of the globe. Japan also placed a premium on anti-corruption, openness, and transparency, as well as financial sustainability, as core principles of infrastructure aid, in addition to emphasizing the debt-servicing capability of recipient nations. These strategies concerning high-quality infrastructure were practiced in a complex geopolitical environment triggered by the BRI and took shape in a more defensive posture as Japanese leaders realized that they must deal with the China challenge in global infrastructure competition (Yoshimatsu 2023). In so doing, Japan re-evaluated its regional infrastructure finance strategies to encourage infrastructure exports (Kratz and Pavlicevic 2019). As a result, Japan and China, through mutual learning, adopted the other’s practices of tying commercial financing with government involvement with a particular focus on physical infrastructure and industrialization (Jiang 2019). Taking note of the China challenge, Yoshimatsu (2022) highlighted the ensuing centralization of policymaking and changes in the institutional arrangements of the Kantei. Mao etal. (2024) also picked up the point concerning a strengthened Kantei in the realm of infrastructure policymaking. These practices can be emblematic of what Chen (2021) noted as a return to mercantilist development finance policy. The aforementioned literature provides the perfect foil for the present study. Our contribution is twofold. First, theoretically, this paper advances the concept of “reciprocal diffusion” between Japan and China. It highlights how Japan’s policy adaptations were not only reactions to China’s actions but were also facilitated by pre-existing domestic enabling conditions, such as historical mercantilist practices. Ultimately, Japan’s roots in developmentalism—defined as active state engagement in promoting economic development—helped shape power centralization (Eaton and Katada 2022). We see reciprocal diffusion as an important aspect of the multidirectional flow of policy practices highlighted by Eaton and Katada (2022), Leutert (2022), and Liao and Katada (2022). Based on our observation of Sino-Japanese interaction, reciprocal diffusion is more likely to happen when two competing states share similar developmental approaches. Japan remodeled its domestic institutions to overcome pressures in infrastructure export. Its adoption of interventionist strategies was conditioned by its past developmental practices, emphasizing the state’s administrative guidance and organic interactions with market actors. Moreover, by highlighting the path dependence and stickiness of developmental institutions in both countries, we echo the aforementioned scholars’ findings concerning the convergence of Sino-Japanese competition and see that external pressures act as accelerators of domestic institutional change, emphasizing a nuanced interplay between domestic structures and external influences. Second, empirically, this study tracks the institutional development within Japan and illustrates the connection between changes in international environments and local responses. We contribute to the existing discussion by taking a deep dive into the domestic political changes within Japan, including legal amendments and institutional arrangements, that have been pivotal in shaping its adaptive strategies 420 K.Yan, J.Su toward China. These insights shed light on the often-overlooked role of domestic factors in enabling Japan to respond effectively to external pressures. By bridging empirical analysis and conceptual innovation, this study enhances our understanding of the two-way influence and adaptive strategies between the two nations and their implications for domestic policymaking environments. It highlights that foreign policy changes are not impervious to influences from domestic factors and actors and the outcome of those changes is deeply rooted in local dynamics. Specifically, how states climbed the global value chain has long-lasting effects on their outlook on competition and global integration, as a state’s development finance approaches are outward expressions of its developmental model. The origins andpractices ofChinese economic statecraft In the postwar years, the Japanese national government explored ways to help firms penetrate overseas markets through foreign aid and build an integrated industrial chain in Asia. The traditional “Japanese model” had two distinct features: focusing on reciprocal exchange and being commercially oriented (Chen 2021). Therefore, Japan benefited from providing aid and investment to improve host countries’ investment environment by investing in hardware and software infrastructure. In the process, the Japanese government worked with business actors during the policymaking and implementation phases. China actively learned and localized developmentalist ideas and practices from Japan in the reform era (see Vogel 2011 for some detailed discussion). In 1976, Chinese leaders discussed ways to learn from Japan including greater opening to the outside and use of foreign capital for the purpose of national rejuvenation (Gu 2009). In 1980, initiated by Gu Mu, the lead Chinese representative of the Sino-Japanese Government Cabinet Meeting, and Saburo Okita, the former Japanese Minister of Foreign Affairs, the Chinese and Japanese governments launched the SinoJapanese Forum on Exchange of Economic Knowledge. This annual forum became a salient platform on which the two countries could “engage in informal dialogues to promote mutual understanding and provide important advice for decision-making” (Gu 2009). Japan’s industrial policies, for instance, especially those carried out by the Ministry of International Trade and Industry (MITI), had profound influences on how China ought to develop its own economy, especially concerning how to support key industries, direct national champions in international markets, and coordinate state resources. In fact, a total of 148 books were published between 1980 and 1993 on Japanese experiences in economic and technological development and how China can learn and adapt from these lessons. Three books stand out in particular: Japan’s Investment and the Rise of Asia (by Yongming Fan), Japan’s Transnational Corporations (by Wenguang Li and Yan Zhang), and Japan’s Post-War Opening to the Outside (by Linan Zhu). They summarized Japan’s experience in opening its economy to the outside, export relations, and development finance and explored how Japan aptly responded to challenges from host countries and competitors. Most 421 Rethinking Sino-Japanese competition: thediffusion of… importantly, these works were later integrated into materials for cadre training at the Central Party School in the early 1990s (Li 1995; Han 2013). Among the key lessons were how Japan linked infrastructure projects and lowinterest loans to advancing domestic commercial interests. For example, Japan’s integration of aid, trade, and investment motivated China to link foreign aid to the interests of domestic companies (Chen 2021). As Japan did in the 1970s, Chinese contractors use loans from the Export–Import Bank of China (Chexim) to assist host countries in funding infrastructure projects. Moreover, China’s current emphasis on international contracting mirrors Japan’s earlier phases, which shifted from exportdriven development financing to foreign direct investment (FDI)–oriented finance in the 1980s. In 1995, the National Conference on the Reform of China’s Foreign Aid Work issued the “Reply on Issues Related to the Reform of China’s Foreign Aid Work.” The publication of the Reply marked the shift from providing economic assistance through fiscal expenditure or “gift funds” to integrating aid with China’s domestic development, such as providing loans via banks and financial institutions to buy Chinese materials and equipment or hire Chinese technicians. In later advances in China’s development finance, Chinese practices began to resemble traditional Japanese business-oriented and exchange-based approaches (Katada and Liao 2020; Chen 2021). Learning through being a receiver of Japanese official development assistance (ODA) and related knowledge via official and unofficial bilateral knowledge exchange, Chinese development finance also aims to facilitate the economic development of host countries and, at the same time, the global expansion of Chinese firms. China’s foreign aid and its firms’ foreign investment became mutually reinforcing because overseas markets can be created via foreign aid. To be specific, as noted by Katada and Liao (2020) and Chen (2021), Chinese foreign aid projects were mainly infrastructure development projects tied to large Chinese firms, similar to the Japanese approach. Similar to Japan, state-backed credits benefit Chinese business actors, as China’s development finance projects, usually dispersed through the China Development Bank (CDB) and the Chexim, are always tied to Chinese businesses. These acts are emblematic of the “international development investment” approach that was once practiced by Japan as the role of state institutions and their active “guidance” remain similar (Saidi and Wolf 2011; Chen 2021). Chen (2021) aptly described the parallels between Sino-Japanese development finance as “one between China’s present and Japan’s past—specifically before the 1980s.” In implementing the “going global” of Chinese SOEs, China’s top leaders also designed new institutional arrangements after launching the BRI. A Leading Group for Promoting the BRI and its Executive Office were created. Both are nested under the NDRC, effectively making it one of the most important economic bureaucracies in implementing national BRI projects and supporting the export of large infrastructure projects with an emphasis on “top-level design” (Yan 2021). While the Leading Group is comprised of members from the Chinese Ministry of Foreign Affairs and the Ministry of Commerce, these ministries would send representatives to station at the NDRC to enhance communication and coordination (210331M). Moreover, because of the commission’s role in macro-managing the domestic economy, it is the main organization coordinating Chinese SOEs. By “reverse engineering” the 422 K.Yan, J.Su domestic economic structure, the NDRC remains China’s “pilot agency,” having the authority to coordinate inside and outside China (Yan 2021). The commission’s role in overseeing China’s development finance was institutionalized in 2014 with the publication of the Administrative Measures for Approving and Record-Filing of Overseas Investment Projects. According to the Measures, the NDRC holds the power to approve investment projects of over one billion USD, and investments between 300 million USD and one billion USD must be kept in the commission’s file. The State Council must approve, based on the commission’s recommendation, investments over two billion USD. However, all investments in sensitive industries must be approved by the commission, notwithstanding the amount, such as telecom, cross-border water resource development, and large-scale land development sectors. In an updated version of the aforementioned Measures, the commission can make appropriate approvals by itself—no longer required to make recommendations to the State Council for larger projects. The inflow and outflow of capital for these projects and BRI ones are under the purview of the commission’s Foreign Capital and Overseas Investment Department (FCOID), which is the department responsible for approving overseas investment projects.If the project is of national importance, the department’s decision is forwarded to the State Administration of Foreign Exchange and China’s policy banks for financing and execution (210401Z). Against this backdrop, the commission handles two sources of projects: top-down and bottom-up. Top-down projects are often the result of bilateral strategic cooperation initiated by China or host countries’ top leaders. These projects enjoy top leadership commitment and are driven by state planning and intervention.1 Bottomup projects, however, are usually initiated by SOEs and private enterprises, which report them to the State Council, the NDRC, or its local offices for approval.2 As the gatekeeper of the State Council, the commission conducts the necessary preliminary research and decides whether the proposed projects fall under central or local authorities (210331M). The commission evaluates each project’s salience based on its economic returns, access to resources, benefits to bilateral relations, and China’s regional influence, among other considerations. If the commission finds a project of strategic importance, it can propose implementing it through business-to-business (B2B) collaboration or government-to-government (G2G) cooperation (210331M). Despite the nature of large BRI projects, the Chinese authorities rely on the NDRC to troubleshoot and coordinate project execution (Paltiel and Yan 2025). 1 The Jakarta-Bandung High-speed Railway Project was a top-down one launched due to high-level exchange. It began with bilateral exchanges between President Joko Widodo and President Xi Jinping when they met in 2014 and 2015. A bilateral framework agreement was signed between the Indonesian Ministry of SOEs and the Chinese NDRC, which then asked the CR to work with its Planning Department, International Cooperation Department, and the FCOID on a feasibility study and a potential bid proposal. After winning the bid, the CR coordinated action through its international arm—the China International Railway Corporation. 2 The Malaysian East Coast Rail Link began as a typical bottom-up project initiated by the China Communications Construction Company. It was perceived that the project could deepen the firm’s presence in Malaysia and help it become a key player in Malaysia’s infrastructure development market. 429 Rethinking Sino-Japanese competition: thediffusion of… financial regulations, Japan’s PQI program, though developed jointly by the MOFA, METI, and MLIT, saw an expansion of JICA’s responsibility in promoting development finance. JBIC would also work with JICA to invest in high-risk projects. Japan’s export of its Shinkansen system to India is reflective of the power concentration used for railway export due to its high capital investment and the involvement of multiple actors across complex subsector systems. Its defeat in the Jakarta-Bandung HSR project prompted a shift toward the adoption of bilateral top leadership negotiation; this can be evidently seen in the Mumbai-Ahmedabad HSR project, when Modi agreed to adopt Japan’s Shinkansen system without any competitive process (Mao etal. 2024). In May 2013, Abe, as Japan’s top sales, visited India and agreed with Manmohan Singh, the then-PM of India, to cofinance a feasibility study of the Mumbai-Ahmedabad HSR Corridor; the two countries signed an MOU later in September. To complete the study, JICA, supported by the Japanese government, invited Japan Railway (JR) East, Hitachi, and Kawasaki, among other relevant actors, to visit India to research the applicability of the Shinkansen technology and transit-oriented development(TOD), said a manager from JR East (181117JRE). The Japanese government’s decision to invite JR East, not JR Central, was because of the latter’s involvement in exporting the Shinkansen to the USA. Two years later, in 2015, Abe visited India again and pledged US$3.6 billion to support quality infrastructure projects, including the aforementioned HSR corridor. The Japanese government, under Abe, played the key coordinating role for the Mumbai-Ahmedabad HSR Corridor. First, though Hitachi won the bid together with other Indian firms, government coordination with other ministries was apparent, as Abe engaged in the signing of MOUs, government-to-government agreements, and packaged the project as one of Japan’s overseas development assistance programs, noted by our interviewees from Japan (181115NM; 181120JK; 181121KK). Second, while JICA provided the feasibility study, its mandate was given by the Japanese state, which would organize and provide loans to this particular project. Third, besides JICA, the International High-Speed Rail Association (IHRA) also plays a coordinating and platform-building role among Japanese HSR actors. Working with the Japanese government, explained by a manager of the association, the IHRA focused on working with HSR operators, transferring the know-how and solving practical challenges faced by technology receivers (181122I). The association frequently exchanges information with MLIT to facilitate the smooth export and implementation of Shinkansen abroad. However, it must be noted that the coordination work done by the Japanese state was not the same as that of the Chinese. The major reason is that infrastructure export is still done through private firms instead of SOEs. Therefore, the Chinese state and the NDRC have more tools at their disposal in terms of influencing, if not coercing, firms to comply with their international strategies. For Japan, the involvement of private firms is not restricted to policy implementation but also to the realm of financing (181121KK). In turn, solving collective action problems in the private sector is not always easily done through a simple concentration of power as Japan’s private firms have become more autonomous (181120K; Chen 2021). 430 K.Yan, J.Su Conclusion This paper argued that a reciprocal diffusion of economic statecraft occurred between China and Japan. Riding on longer trends of power centralization, external competition from China served as an accelerator for the second Abe administration to further consolidate the power of the PM in decision-making. Such power consolidation, according to scholars, signals Japan’s return to its roots, which initially influenced China’s approach to development finance and infrastructure export. The occurrence of reciprocal diffusion suggests that (1) China’s rise has significant implications on the international and domestic behaviors of its regional neighbors and (2) Abe’s centralization of power was made possible because of Japan’s traditional approach to infrastructure finance and the country’s recent trend in bolstering its PM’s authority. The strengthening of the Kantei empowered the PM’s ability to wield authority among ministries. Under this policy structure, decision-making is made and implemented in a top-down and political demand-driven manner, in areas such as infrastructure export, foreign policy, and national security. Ultimately, the centralization of authority was a means to streamline decision-making, which in turn allowed the Prime Minister to exert greater influence on how to realize his vision for Japan’s global competitiveness. The implication of reciprocal diffusion on the regional architecture of Asia–Pacific can be threefold. First, we are witnessing what Kuik (2021) argued is a double increase in regional financiers and demand for infrastructure development. Friendly competition between China and Japan leads to more opportunities for Asian countries. With more options, these states can bargain for better loans and a complete transfer of technology—both help secondary states escape dependent development. Moreover, there will be a diversification of lenders. Investment may not just be from the global north, but a strengthening of southsouth relations (esp. infrastructure investment). Such integration helps foster a vibrant economic zone, albeit with complex relationships and crisscrossing technical standards. Second, however, more Chinese and Japanese money and technology in the region may also reinforce dependency. A deepening of their respective grand regional strategies may spiral into unrestrained competition that could fragment the region. Moreover, competition based on ideological and geopolitical grounds can fragment the region with more friend-shoring and on-shoring of supply chains—leading to concurrent financial regimes, complex interdependence, and a latticework of intersecting relations. Under such conditions, secondary states may be forced to bandwagon or work together on a mechanism to incorporate both regional powers. Needless to say, the region is moving toward great uncertainty and with lots of moving parts. Finally, competition is not the only leitmotif. Both governments and businesses at national and commercial levels are working on sustainable or green development. While promoted and highlighted by Japan, Chinese business groups have responded by recognizing and integrating the necessary criteria into their 431 Rethinking Sino-Japanese competition: thediffusion of… interactions with Japanese counterparts. The CBD and JBIC also signed an MOU in October 2018, and the two banks agreed to provide financial support to projects that comply with global standards (Keidanren 2018). To conclude, competition or cooperation, Asia remains one of the most dynamic regions in the world, home to vibrant market opportunities and various types, even contradictory, of market structures and developmental outlooks. Acknowledgements We would like to thank Haojiu Liu for his research support. A draft paper was presented at the 2023 ISA Annual Meeting in Montreal, Canada, sponsored by the Association of Chinese Political Studies and at the First International Symposium on Asia-Europe Development: “Asia in Flux: Network Power, New Regionalism and Global Development” in Hong Kong, sponsored by the Centre for China Studies, the Chinese University of Hong Kong. Special thanks to Muyang Chen, Phillip Lipscy, and James Paradise for their incisive comments. The authors take full responsibility for any errors in the text. Funding Open Access funding enabled and organized by Projekt DEAL. Data availability Not applicable. Declarations Conflict of interest The authors declare no competing interests. Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/ licenses/by/4.0/. References Baldwin D (1985)Economic Statecraft. 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Pac Rev 36:148–176 Publisher’s Note Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Authors and Affiliations KarlYan1· JingSu1,2 * Jing Su [email protected] Karl Yan karl[email protected] 1 School ofHumanities andSocial Science, The Chinese University ofHong Kong, Shenzhen, China 2 Cluster ofExcellence SCRIPTS, Freie Universitat Berlin, Berlin, Germany